Gilts May Stutter But Should Avoid Sharp Losses Next Year – Analysts

U.K. government bonds have wobbled in recent days, but despite a gloomy economic backdrop, many investors are not anticipating a surge in the government’s borrowing costs next year.

Investors are now demanding half a percentage more to buy U.K. government bonds maturing in 10 years instead of German government bonds of the same maturity, the highest premium in eight months. The difference in bond yields between top-rated gilts and French debt has almost vanished despite two of the three main credit rating agencies stripping France of its cherished triple-A rating this year.

To be sure, yields on bonds sold by other countries seen has harbours of safety in times of tumult–Germany, the U.S., and to a lesser degree France–have also climbed in recent weeks as hopes that U.S. lawmakers will avert growth-crimping spending cuts and tax rises have lifted riskier assets.

Worries of a Greek exit from the euro zone in the immediate future have also abated. Haven government bonds with their low yields are looking pale in comparison.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.